FTA provides further clarity on SWIFT transactions

Background

In February 2024, the Federal Tax Authority FTA) issued Public Clarification VATP036 addressing whether financial institutions can rely on SWIFT messages as sufficient documentation for recovering input VAT on interbank services received from non-resident banks. The clarification confirmed that where certain conditions were met, financial institutions would not be required to self-issue tax invoices under the reverse charge mechanism for each individual SWIFT transaction. However, ambiguity remained regarding the status of this tolerance and whether it was intended to apply only to SWIFT messages or could be extended to other Concerned Services.

This prompted the issuance of a new clarification: VATP041, published on 14 April 2025, which replaces VATP036 and offers more precise guidance. In doing so, it confirms the FTA’s position that SWIFT messages may be treated as documentary substitutes for tax invoices provided that they meet specific criteria to qualify as “Qualifying SWIFT Messages”.

 

General principles on self-invoicing for Concerned Services

As clarified in VATP044, published in May 2025, there is in principle a broad-based requirement for UAE VAT-registered recipients to self-issue tax invoices when importing Concerned Services. This applies under the reverse charge mechanism where the UAE recipient is treated as making a supply to itself. However, in practice, the obligation to self-invoice does not apply in most cases, as the foreign supplier will usually issue a tax invoice or other documentation that can be treated as such under UAE VAT rules.

Only where the overseas supplier fails to issue such a document, and no equivalent document exists, is the UAE recipient required to issue a tax invoice to itself. The clarification in VATP041 is a sector-specific application of this general principle, tailored to the volume and nature of SWIFT-based financial transactions.

 

What’s new under VATP041?

Compared to VATP036, VATP041 provides greater legal certainty and clarity for financial institutions dealing with interbank services received via the SWIFT system.

• First and foremost, VATP041 explicitly replaces VATP036, thereby consolidating the FTA’s position on the topic of SWIFT messages.
  
  
• VATP041 also offers a clearer delineation of its scope. Whereas VATP036 focused primarily on input tax recovery, VATP041 distinctly separates its analysis into two components:

o    the obligation to issue tax invoices in respect of SWIFT messages; and

o    the documentary requirements for recovering input tax in respect of SWIFT services.

It further clarifies that the guidance applies exclusively to SWIFT-related services, and not to any other category of Concerned Services.

• One of the key additions in VATP041 is the formal introduction of the term “Qualifying SWIFT Message”. These are SWIFT messages that meet specific criteria, including details such as the name and address of both the non-resident bank and the UAE recipient, the transaction date, SWIFT and transaction reference numbers, a description of the transaction, and the consideration charged along with the currency used. Only messages that include all of this information will be treated as sufficient substitutes for a tax invoice.
• VATP041 confirms that the FTA is expressly exercising its discretionary powers under Article 59(7)(b)) of Cabinet Decision No. (52) of 2017 on the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (UAE VAT Executive Regulations) to waive the self-invoicing requirement in these cases. This represents a more explicit legal basis for the administrative concession compared to VATP036, which had referenced the principle more generally without citing the specific provision.
• VATP041 clarifies that where a Qualifying SWIFT Message is retained, it will be treated as equivalent to a tax invoice issued by the non-resident supplier for purposes of input VAT recovery. This enables financial institutions to reclaim input VAT under Article 55(1)(a)(3) of the Decree-Law, provided the standard conditions for input VAT recovery are satisfied.
• Finally, VATP041 includes a practical illustrative example, demonstrating how a financial institution that receives a SWIFT service on 3 April 2025 may rely on a Qualifying SWIFT Message in lieu of issuing a self-invoice. If the message is retained with all required information, no tax invoice needs to be issued by the statutory deadline (17 April 2025), and input VAT can be recovered accordingly.